ONTARIO ENERGY BOARD

Transcription

1 Filed 0-- EB-0-0 Page of ONTARIO ENERGY BOARD IN THE MATTER OF the Ontario Energy Board Act,, S.O., c., (Schedule B); AND IN THE MATTER OF an application by Ontario Power Generation Inc. pursuant to section. of the Ontario Energy Board Act, (the Act ) for an Order or Orders determining payment amounts for the output of certain of its generating facilities. APPLICATION FOR AN ACCOUNTING ORDER ESTABLISHING A DEFERRAL ACCOUNT TO CAPTURE THE REVENUE REQUIREMENT IMPACT ON OPG S PRESCRIBED NUCLEAR FACILITIES RESULTING FROM CHANGES IN STATION END-OF-LIFE DATES. OPG has determined that it will change, for accounting purposes, the current end-of-life ( EOL ) dates for its Bruce and prescribed nuclear facilities, effective December, 0. These EOL date changes will have material revenue requirement impacts beginning January, 0.. The revenue requirement impacts result from changes to OPG s liabilities for nuclear decommissioning and nuclear waste management ( nuclear liabilities ), effective December, 0, and to depreciation and amortization expense.. OPG filed an application (EB-0-0) with the OEB under section. of the Ontario Energy Board Act,, S.O., c. (Schedule B) seeking approval for payment amounts for generating facilities prescribed under Ontario Regulation /0 ( O. Reg. /0 ). The OEB issued its Decision on November 0, 0. The EB-0-0 Payment Amounts Order establishing the current payment amounts was issued on December, 0.. This Application is in response to the OEB s EB and EB-0-0 decisions and orders which state that an application for an accounting order is required if:

2 Filed 0-- EB-0-0 Page of 0 0 i. OPG proposes an accounting change impacting the calculation of its nuclear liabilities, other than as a result of an Ontario Nuclear Funds Agreement ( ONFA ) Reference Plan update, which results in a revenue requirement impact for the prescribed facilities; or, ii. OPG proposes to change the EOL dates of its prescribed nuclear facilities, for depreciation and amortization purposes, which results in a non-asset Retirement Cost ( ARC ) revenue requirement impact.. As set out in the EB and EB-0-0 decision and orders, the accounting order application is only required if the revenue requirement impact is neither reflected in current or proposed payment amounts nor recorded in an authorized deferral or variance account and the annualized revenue requirement impact for the prescribed facilities is $0M or greater.. The changes to the nuclear liabilities for the prescribed facilities are not associated with an ONFA Reference Plan update and therefore the resulting revenue requirement impact for the prescribed facilities cannot be recorded in the existing Nuclear Liability Deferral Account or any other authorized deferral or variance account. The revenue requirement impact is also not reflected in current payment amounts.. The financial impact of changes in the nuclear liabilities and depreciation and amortization expense for the Bruce facilities, determined in accordance with U.S. GAAP, will be reflected in the Bruce Lease Net Revenues Variance Account in accordance with the EB-0-00 Payment Amounts Order and is therefore not subject to this Application.. OPG is not able to provide the annual revenue requirement impact at this time because actual year-end information, required to calculate the December, 0 nuclear liabilities adjustment, is not yet available. However, OPG s preliminary estimate is that the annual revenue requirement impact will be a credit to ratepayers in excess of the $0M materiality threshold established by the OEB.. OPG requests the OEB s approval to establish a deferral account to record the revenue requirement impact on the prescribed facilities arising from changes to nuclear liabilities

3 Filed 0-- EB-0-0 Page of 0 0 on December, 0 and depreciation and amortization expense beginning January, 0 resulting from changes to station EOL dates. The nuclear liabilities impact will be determined in accordance with the methodology previously approved by the OEB for determining the revenue requirement impacts of nuclear liabilities for OPG. 0. The deferral account is proposed to record the revenue requirement impact effective January, 0 until the effective date of the OEB s next nuclear payment amounts order incorporating the above impacts into OPG s payment amounts.. As the revenue requirement impact commences January, 0, OPG requests that the OEB issue an interim order effective January, 0, approving the establishment of the requested deferral account on an interim basis. This will permit the above revenue requirement impacts to be recorded in a deferral account pending the OEB s final order in respect of this Application.. OPG expects that information supporting the balance in the proposed account, as well as the timing and manner of its disposition, would be reviewed in a future payment amounts application. Accordingly, there is no rate impact at this time from this Application.. As there is no immediate rate impact, OPG requests that this Application proceed by way of a written hearing.. The Application will be supported by written evidence, as required. The written evidence filed by OPG may be supplemented or amended from time to time by OPG prior to the OEB s final decision on the Application.. OPG further applies to the OEB pursuant to the provisions of the Act and the OEB Rules of Practice and Procedure for such orders and directions as may be necessary in relation to the Application and the proper conduct of this proceeding.. The persons affected by this Application are all electricity consumers in Ontario. It is impractical to set out the names and addresses of the consumers because they are too numerous. However, consistent with the OEB s prior directions, OPG has provided notice to intervenors of record in EB and EB-0-0.

4 Filed 0-- EB-0-0 Page of OPG requests that copies of all documents filed with the OEB by each party to this Application along with copies of all comments filed with the OEB in accordance with Rule of the OEB Rules of Practice and Procedure be served on the applicant and the applicant s counsel as follows: (a) The applicant: Andrew Barrett Vice President, Regulatory Affairs Ontario Power Generation Inc. Mailing Address: H G 00 University Avenue Toronto ON. MG X Telephone: -- Facsimile: -- Electronic Mail: opgregaffairs@opg.com (b) The applicant s counsel: Charles Keizer Torys LLP Mailing Address: Wellington St. West P.O. Box 0 Toronto Dominion Centre Toronto ON. MK N Telephone: Facsimile: --0 Electronic Mail: ckeizer@torys.com

5 Filed 0-- EB-0-0 Page of 0 0 (c) The applicant s counsel: Carlton D. Mathias Ontario Power Generation Inc. Mailing Address: H A 00 University Avenue Toronto ON. MG X Telephone: -- Facsimile: -- Electronic Mail: carlton.mathias@opg.com Dated at Toronto, Ontario, this nd day of December, 0: [Original signed by] Andrew Barrett Vice President, Regulatory Affairs

6 Filed 0-- EB-0-0 Page of BACKGROUND OPG filed an application (EB-0-0) with the OEB under section. of the Ontario Energy Board Act,, S.O., c. (Schedule B) seeking approval for payment amounts for generating facilities prescribed under Ontario Regulation /0 ( O. Reg. /0 ). The OEB issued its Decision on November 0, 0. The EB-0-0 Payment Amounts Order establishing the current payment amounts effective November, 0 for OPG s regulated hydroelectric and nuclear facilities was issued on December, 0. Pursuant to the OEB s EB and EB-0-0 decisions and orders, an application for an accounting order is required if: i. OPG proposes an accounting change impacting the calculation of its nuclear liabilities, other than as a result of an ONFA Reference Plan update, which results in a revenue requirement impact for the prescribed facilities; or ii. OPG proposes to change the EOL dates of its prescribed nuclear facilities for depreciation and amortization purposes that results in a non-arc revenue requirement impact. As set out in the EB and EB-0-0 decision and orders, the accounting order application is only required if the revenue requirement impact is neither reflected in current or proposed payment amounts nor recorded in an authorized deferral or variance account and the annualized revenue requirement impact for the prescribed facilities is $0M or greater..0 CHANGES IN NUCLEAR STATION END-OF-LIFE ( EOL ) DATES There are changes to the EOL dates for each of the Bruce, Pickering and Darlington nuclear stations. The changes to the EOL dates will be implemented effective December, 0 through adjustments to OPG s nuclear Asset Retirement Obligation ( ARO ) EB-0-0 Decision (at page ); requirement was originally established in the EB Payment Amounts Order (page ) EB-0-0 PAO (pages and 0)

7 Filed 0-- EB-0-0 Page of 0 0 and Asset Retirement Cost ( ARC ) balances and will be reflected in depreciation and amortization expense beginning January, 0. The changes to the nuclear station EOL dates are as follows:. Bruce Nuclear Stations On December, 0, the Province of Ontario (the Province ) announced that it will proceed with the refurbishment of the six units (i.e., Bruce A Units & and Bruce B Units -) operated by Bruce Power under a lease agreement with OPG and that the Bruce Power Refurbishment Implementation Agreement ( BPRIA ) between the Independent Electricity System Operator ( IESO ) and Bruce Power has been correspondingly updated. The updated BPRIA sets out the refurbishment schedule for the six un-refurbished Bruce units and the expected post-refurbishment EOL dates for all eight Bruce units. The Province s announcement and the execution of the updated BPRIA provide OPG with necessary evidence to align the Bruce EOL dates for accounting purposes with the updated BRPIA, effective December, 0. As a result, the average EOL date of the Bruce A station will be extended from December, 0 to December, 0 and the average EOL date of the Bruce B station will be extended from December, 0 to December, 0. As certain costs associated with the nuclear liabilities are, by their nature, shared across the nuclear fleet, changes in lifecycle used fuel and waste volumes resulting from changes to a particular station EOL date typically impact the ARO and ARC for all of OPG s nuclear stations. As such, changes in Bruce station EOL dates impact the ARO and ARC for OPG s prescribed nuclear stations and these changes are therefore included in this Application. The amended BPRIA can be found on the IESO s website at the following URL: Implementation-Agreement.PDF

8 Filed 0-- EB-0-0 Page of 0 0. Pickering Nuclear Station OPG has achieved high confidence that all four of Pickering Units - are expected to operate until at least the end of 00. This confidence was achieved through work on the Fuel Channel Life Extension project, among other work. Based on confirmation in 0 of high confidence that all four Pickering Units - are expected to operate until at least the end of 00, OPG is adopting an average EOL date for accounting purposes of December, 00 for these units, effective December, 0. This represents an extension from the current average EOL date of April 0, 00.. Darlington Nuclear Station In November 0, OPG s Board of Directors approved the refurbishment schedule for the four units at the Darlington station. This approval formalized the planned durations of the refurbishment outages. Based on the resulting scheduled return-to-service dates for each unit and an assumed post-refurbishment operating life for the units, OPG is extending the average station EOL date for Darlington to December, 0, from the current date of December, 0. This change in expected station EOL date will be effective December, 0..0 REVENUE REQUIREMENT IMPACTS AND MATERIALITY The largest revenue requirement impact arises from the change in OPG s nuclear liabilities effective December, 0. This impact will be calculated using the OEBapproved methodology for determining the revenue requirement impact of the nuclear liabilities for OPG (for example, as presented in EB-0-0 Ex. C--). The change in the Bruce stations EOL dates is the predominant driver of the changes to the nuclear liabilities and therefore the revenue requirement impact. A substantial amount of work, based on actual year-end information (including the actual unadjusted ARO balance and discount rate for calculating the ARO change), is required to determine the exact December, 0 ARO and ARC adjustments reflecting the above EOL date changes. These adjustments will be reflected in OPG s December, This Application does not include any costs of executing the Darlington Refurbishment Project

9 Filed 0-- EB-0-0 Page of audited financial statements. Once the ARO and ARC adjustments have been derived for the prescribed and Bruce facilities, the revenue requirement impacts beginning in 0 can be determined. OPG s initial assessment is that the above impact on the prescribed facilities will be a ratepayer credit in excess of the $0M materiality threshold for filing this accounting order application. Information required to support the revenue requirement impact will be filed as part of OPG s normal filing requirements in its next payment amounts application. The accuracy of the amounts recorded in the proposed deferral account will be subject to review in a future payment amounts application as part of any proposed disposition of the account balance. The financial impact of changes to the nuclear liabilities and depreciation expense for the Bruce facilities, determined in accordance with US GAAP, will be recorded in the Bruce Lease Net Revenues Variance Account in accordance with the EB-0-00 Payment Amounts Order. As such, these financial impacts are not subject to this Application..0 NEW DEFERRAL ACCOUNT OPG requests the OEB s approval to establish a deferral account to record the revenue requirement impact on the prescribed facilities arising from changes to the nuclear liabilities on December, 0 and changes in depreciation and amortization expense beginning January, 0 resulting from changes to station EOL dates as outlined in Section.0.. Justification The EB and EB-0-0 decisions and orders require OPG to file this Application as the changes at the end of 0: will not result from an ONFA Reference Plan update; will result in an annualized revenue requirement impact for the prescribed facilities that is not reflected in current or proposed payment amounts for 0;

10 Filed 0-- EB-0-0 Page 0 of will result in an annualized revenue requirement impact for the prescribed facilities that is expected to be higher than the $0M materiality threshold; and, will not be eligible to be recorded in a previously authorized deferral or variance account. 0 0 OPG will be making the change to the December, 0 nuclear ARO and ARC reflecting above-noted changes to the nuclear station lives in order to fairly present its financial statements in accordance with US GAAP. The revised station lives represent OPG s current best estimate, for accounting purposes, of the expected period of operation for its nuclear facilities. In the case of the Bruce stations, which are the main driver of the revenue requirement impact, the EOL date changes result from an event wholly external to OPG, being the execution of the amended BPRIA between Bruce Power and the IESO.. Account Operation OPG proposes that the deferral account record the revenue requirement impact on OPG s prescribed nuclear facilities outlined in this Application. As the changes in station lives and ARO and ARC balances will be effective December, 0, the corresponding revenue requirement impact will begin January, 0. Therefore, OPG proposes to record this revenue requirement impact effective January, 0 until new payment amounts incorporating these impacts come into effect. OPG proposes that the OEB s Prescribed Interest Rate policy apply to the monthly opening balance of this account. OPG will apply simple interest to the monthly opening balance of the account until the balance is disposed.. Reporting OPG proposes to file the balance in the proposed deferral account in conjunction with its regular reporting on the other variance and deferral accounts approved by the OEB.. OPG s Future Payment Amounts Applications As part of the next nuclear payment amounts application, OPG will provide information with respect to its nuclear liabilities, separately for the prescribed and Bruce facilities, in the format consistent with EB-0-0, Ex. C-- Tables to. This will include

11 Filed 0-- EB-0-0 Page of separate information on the revenue requirement impact of the December, 0 changes to the nuclear liabilities reflecting changes to nuclear station EOL dates outlined in Section.0. OPG will provide a proposal for the disposition of amounts recorded in the new deferral account in a future application. As part of that application, OPG will also provide detailed information to support amounts recorded in the account. The account balance will be included in the audit of OPG s deferral and variance account balances.